updated 12:12 pm EST, Mon November 11, 2013

Supplier posts record revenues, but takes hit on profits

Asian supplier Pegatron is facing some financial trouble, allegedly due to cutbacks on iPhone 5c orders, according to Reuters and the Wall Street Journal. Both news agencies, quoting unnamed sources, say that the 5c has been selling relatively weakly compared to the 5s, supposedly prompting Apple to ask for fewer additional units. Apple has released general iPhone sales figures for the last quarter, but never distinguishes between models in any of its public data.

For Pegatron's third-quarter results, issued today, the iPhone 5c is said to have helped push Pegatron up to record revenues. The company posted less net profit than expected however, due to costs associating with spooling up production for the device. Pegatron handles some production of both the 5c and the iPad mini, although it could soon have help from Wistron and Compal.

Most iPhone sales are typically believed to be skewing towards Apple's flagship, the iPhone 5s, which has more advanced features and has been much more prone to sellouts and shipping delays. The iPhone 5c is essentially a replacement version of the iPhone 5, albeit with a polycarbonate back and a slightly higher-capacity battery. The company has been aggressively advertising the 5c, however, and some analysts believe the mix is closer to 50-50.

If the 5c follows tradition, its sales should be about the same or slightly higher than those of the 4S shortly after the iPhone 5 came out, since the 5c replaces the iPhone 5 as the company's midline offering. Unconfirmed stories about Apple suppliers should be "questioned" according to CEO Tim Cook, and such reports can sometimes be manufactured and "leaked" as part of an effort to manipulate the stock. The Journal in particular has been misled by some of its sources on Apple information in the past.

Don't really understand how they can make this conclusion (is it yellow journalism? market manipulation? I hate Apple?:

"For Pegatron's third-quarter results, issued today, the iPhone 5c is said to have helped push Pegatron up to record revenues. The company posted less net profit than expected however, due to costs associating with spooling up production for the device. "

It seems like iPhone 5C is not selling the way Apple wanted. You keep hearing about how its not selling well or how Apple has cut orders. http://knowtifier.com/news/839/apple-ordering-less-iphone-5c-models-from-pegatron/

poddercast: "you keep hearing" about it because there is something of a media echo chamber about this among Mac sites. We have to report on such stories if they're repeated by reasonably legit sources like Reuters and WSJ, but that doesn't necessarily mean they are entirely accurate (see Tim Cook's remarks cautioning analysts not to rely on single-source supplier leak stories).

Considering that the iPhone 5c takes two of the top 10 spots in the Japanese smartphone market, including #2 spot, I find the argument somewhat deceptive. It is possible that Apple over-estimated the acceptance of a "less expensive" model and underestimated the acceptance of the more expensive model. All that proves, though, is that the real majority of Apple buyers want the best available, not the cheapest.